THE EVOLUTION AND GROWTH OF THE CONCEPT OF TRANSBORDER REPUTATION IN INDIA

Introduction

Trans-border reputation can be understood to be present when “a product and its trade name transcend the physical boundaries of the geographical region and acquire a trans-border or overseas or extra territorial reputation not only through import of goods but also by its advertisements.”[1]

The origin of trans-border reputation in India can be traced back to the modern policies of liberalisation, privatisation and globalisation introduced in the 1990’s that opened up the Indian economy, making it vulnerable to competition from international companies by blurring the concept of physical borders.

In the present era of digitalization and incessant use of the internet, easy travel and fast fashion, wherein goods and services are available for consumption across countries, the concept of territorial markets has ceased to exist, and we all identify ourselves as global consumers in a common marketplace.

In view of the above, it became incredibly difficult for bona fide businesses to protect their rights in their marks across countries; and despite spending considerable effort and money on marketing, advertisement and brand promotion, businesses often find their trade marks being diluted as a result of infringement and passing-off across jurisdictions.

Until the current Trade Marks Act, 1999 (hereinafter referred to as ‘the Act’) came into force, foreign marks in India did not enjoy any specific statutory protection under the Act and had to rely on the common law action of passing-off in order to safeguard their rights. However, in line with the TRIPS Agreement as well as the optional guidelines promulgated by WIPO's Joint Recommendation on the protection of well-known marks, the Act introduced the concept of well-known marks into Indian Trade Mark law. Section 2(1)(zg) of the Act defines well-known trade marks as ‘a mark which has become so to the substantial segment of the public which uses such goods or receives such services that the use of such mark in relation to other goods or services would be likely to be taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first-mentioned goods or services.’ Further, protection is granted to well-known trade marks under the Act under Sections 9 and 11.

The concept of transborder reputation also involves a thorough understanding of the concept of reputation and goodwill, which though used interchangeably, have been interpreted differently by courts. Goodwill can be understood as an asset of a business whereas reputation refers to the common knowledge amongst the public of something with respect to a particular feature that they possess which further acts as a source identifier.

Assessing the evolution in the concept of trans-border reputation vide case laws

The concept of transborder reputation in India has its origin in the landmark judgement of N.R Dongre v. Whirlpool Corporation[2] Ltd. In this case, the Respondent, a multinational corporation incorporated in the United States of America, was engaged in the process of manufacturing, selling, distributing and selling washing machines across numerous jurisdictions. In India, the Respondent obtained registration of their mark ‘WHIRLPOOL’ in the year 1956 in Classes 07, 09 and 11, however, their registration lapsed in 1977 due to non-renewal. In the meantime, in 1992, the Appellant, an Indian company, got the trade mark ‘WHIRLPOOL’ mala fidely registered for washing machines.

The issue before the Supreme Court was whether an act for passing off could be maintained in view of the fact that the Respondent had no valid registration in India post 1977. The Supreme Court was of the view that the Respondents, due to long prior use and extensive sale and advertising, had spill over or transborder reputation in the Indian market and the relevant section in India, associated the mark ‘WHIRLPOOL’ with the Respondent only. The Court further went on and opined that the Appellant had no plausible explanation for adopting an identical mark for identical goods, apart from the intention to trade upon the transborder reputation of the Respondent. Further, the Court observed that the fact that the cost of Appellant’s washing machine was 1/3rd of the cost of the Respondent’s washing machine was enough to substantiate the argument that the Appellant’s washing machines were not of the same engineering standard and were inferior in quality to the washing machines of the Respondent.

While upholding the rights of the Respondent in their mark ‘WHIRLPOOL’ the Supreme Court held as follows:

“The knowledge and awareness of a trademark in respect of the goods of a trader is not necessarily restricted only to the people of the country where such goods are freely available, but the knowledge and awareness of the same reaches even the shores of those countries where the goods have not been marketed. When a product is launched and hits the market in one country, the cognizance of the same is also taken by the people in other countries almost at the same time by getting acquainted with it through advertisements in newspapers, magazines, television, video films, cinema, etc. even though there may not be availability of products in those countries because of import constrictions or other factors. In todays world it cannot be said that a product and the trademark under which it is sold abroad, does not have a reputation or goodwill in countries where it is not available. The knowledge and awareness of it, and its critical evaluation and appraisal travels beyond the confines of the geographical area in which it is sold. This has been made possible by the development of communications systems which transmit and disseminate the information as soon as it is sent or beamed from one place to another. Satellite television is a major contributor of the information explosion. Dissemination of knowledge of trademark in respect of a product through advertisement in media amounts to use of the trademark, whether or not the advertisement is coupled with the actual existence of the product in the market.”

Similarly, in Haw Par Bros. International Ltd v. Tiger Balm Co. (P) Ltd. and Ors.[3], the Court held that prior use of a mark has more significance than prior registration of a mark and as in this case, the Appellants were the first to use the mark ‘TIGER BALM’ and ‘TIGER’ in English and Chinese as well as the leaping tiger device extensively within and outside India, and as a result, the Appellant had acquired transborder reputation in its mark. The Court held that the right of the Appellants to institute the said suit were not barred in lieu of non-registration of trade mark in India as the Appellant’s reputation had transcended in the Indian market.

The concept of transborder reputation was further discussed in the case of Milmet Oftho Industries and Ors. a. Allergan Inc.[4] In this case, both the Appellant and the Respondent were pharmaceutical companies manufacturing a drug under the mark ‘OCUFLOX’. The contention of the Respondent being that they were the prior users of the mark globally and, the contention of the Appellant being that since the product of Respondent was not introduced in India, the Respondent was not entitled to an injunction. The Court ruling in favour of the Respondent held that the ultimate test should be who is first in the world market. The judgment in this case gave a whole new dimension to the law on protection of foreign trade marks as according to the ratio of this judgment, foreign claimants could now protect their marks solely on the basis of their prior use in the world provided an intention of doing business in India could be shown.

In view of the above cases, we can construe that the Indian courts were following the universality principle. The universality principle states that an action of passing off can be maintained if a trademark has a widespread international reputation even though the goods under the mark are not available in the domestic market.

However, there has been a gradual shift in the understanding of transborder reputation by the Indian Courts. In Mac Personal Care Pvt. Ltd. and Ors. v. Laverana Gmbh & Co. KG.[5], the Respondents i.e. Laverana Gmbh & Co. KG, were using the trade mark ‘LAVERA’ and their Indian application at that point was pending registration. The Respondents’ however had presence across numerous jurisdictions like Germany, Denmark, Hong Kong, Italy, France, Singapore etc. and the mark had earned goodwill and reputation. Further, the products under the said mark of the Respondents were available for sale on e-bay and other online retail stores accessible to all. On the other hand, Mac Personal Care Pvt. Ltd., having its business operations in India, started manufacturing and marketing goods under the mark ‘MAC’S LAVERA’ and later applied for registration of the same. While upholding the rights of the Respondents in their mark, keeping in mind the evidence relied upon like large number of Indians traveling overseas; in flight catalogues/magazines etc.; large number of students from India to countries where the Respondents’ goods are extensively sold, online availability of its products etc., the Court criticized that in cases of passing off, many a times, interim injunctions are granted on the basis of global nature of reputation without insisting on any localized business. In this case, the court did not follow blindly the universality principle but focussed also on what all came under the ambit of ‘use’ and ‘goodwill’ in the context of transborder reputation.

Further in E.I. Du Pont De Nemours & Co V. Gemini Distilleries Ltd.[6], the IPAB held that while the Appellants were the rightful proprietors of the mark ‘DU PONT’ with respect to alcoholic drinks such as whisky, brandy, gin and beer in several jurisdictions around the world, they could not prove that their reputation had spilled over to the Indian market and therefore, they failed to succeed in seeking any relief against the Respondents, who were using the mark ‘DUPONT’ in India. The IPAB further opined that the evidence provided by the Appellants comprising of trade mark certificates in numerous jurisdictions and sales figures in other countries does not suffice to prove that the Appellants have a presence in India and the Appellants should adduce cogent evidence in the form of extensive advertising in journals, magazines, presentations at fairs, exhibitions etc. to prove its spill over reputation in India. Therefore, to stop the Respondents from using their mark DUPONT would be detrimental to the Respondents who have bona fidely used the mark.

The most recent landmark case on transborder reputation has been the Toyota Jidosha Kabushiki v M/S Prius Auto Industries Ltd.[7] case which has been adjudicated taking a different approach from what the norm has been.

The Plaintiff i.e. Toyota is one of the largest automobile companies in the world and claims to have launched its first hybrid car in the world by the name ‘PRIUS’ in the year 1994 and the same was sold in Japan in 1997. The Indian application for the same was filed in 2009 and was pending registration. In the meantime, the Plaintiff came across the Defendant’s registration of the mark ‘PRIUS’ and use of the same as a part of its corporate name. The Defendant is engaged in the business of manufacturing automobile spare parts and had constituted the Company in the year 2002. The Plaintiff filed for obtaining a permanent injunction against the Defendant on the ground of their spill over reputation in India and resulting mala fide intention of the Defendant to trade upon it for illegal gains. The issue before the Court was to determine whether the Defendant is guilty of passing off its goods as that of the Plaintiff; and whether to follow the territoriality principle or the universality principle.

The main contention of the Plaintiff was that since 1997, the mark ‘PRIUS’ of the Plaintiff was widely advertised and publicized across several leading newspapers and magazines across the world and that recognition and reputation of a trade mark are not subject upon the actual sale of the goods under the mark in India. The Defendant on the other hand contended that it adopted the mark ‘PRIUS’ bona fidely in April 2001 and explained that the adoption came from the sentiment ‘Pehle Prayaas’ in view of the Defendant’s first attempt. Further, it contended that the Plaintiff had not adopted the mark in India until 2009 and more importantly, the Plaintiff had no presence in India vide advertisements at the time when the Defendant entered the market. The Defendant argued that there is no evidence put forward by the Plaintiff corroborating spill over reputation and goodwill of the Plaintiff’s mark to the Indian market prior to April 2001 i.e. date of adoption of the mark by the Prius Auto Industries.

The Supreme Court, while relying on the Starbucks (HK) Ltd. and Anr. v British Sky Broadcasting Group PLC. and Anr. case which states that ‘where the claimant's business is carried on abroad, it is not enough for a claimant to show that there are people in this jurisdiction who happen to be its customers when they are abroad. The Court must be satisfied that the claimant's business has goodwill within its jurisdiction’, held that the territoriality principle was way forward and that the Plaintiff to succeed in an action of passing off should be able to establish that its reputation had spilled over to the Indian market prior to the date of adoption of the mark by the Defendant.

The Court, while ruling in favour of the Defendant, held that the Plaintiff failed to give satisfactory evidence to show that it has acquired goodwill under the name 'PRIUS' in the Indian market prior to April 2001. The Court was of the opinion that “The advertisements in automobile magazines, international business magazines; availability of data in information-disseminating portals like Wikipedia and online Britannica dictionary and the information on the internet, even if accepted, will not be a safe basis to hold the existence of the necessary goodwill and reputation of the product in the Indian market at the relevant point of time, particularly having regard to the limited online exposure at that point of time, i.e., in the year 2001.” Further, the Court held that not all motor vehicles which are sold by Toyota in various foreign jurisdictions become known in India.

In view of the above, if a foreign entity wants to protect its marks in India, it would have to establish its trans-border reputation by proving knowledge of its marks amongst the relevant section of public in India. For doing so, the reputation of the mark of the foreign entity must reach a substantial segment of consumers in India via extensive advertising in magazines, journals, social media etc, which have wide circulation among the relevant public in India. Further, the foreign entity cannot claim transborder reputation by mere use in India at places like duty free shops or shops with limited public access. In addition to establishing spill over reputation in India, the foreign entity must not delay in initiating appropriate proceedings against the offender. While it is not necessary for the foreign entity to have a branch or an office in India or have extensive sales in India, it is necessary for the foreign entity to provide cogent and clear evidence to showcase the spill over of its reputation to the Indian market.

Conclusion

The concept of transborder reputation in India has evolved with the growth of Intellectual Property awareness in the country. Each of the above-mentioned cases has at length discussed the different facets contained in the concept. Over the years, we can see a gradual but steady shift from the universality principle to the territoriality principle. The Indian Courts, while deciding whether a mark has transborder reputation in India focus on the publicity and awareness of the mark amongst the relevant public within India as opposed to the mark having a reputation internationally. It has become pertinent for foreign claimants to prove that their mark has acquired distinctiveness in India and the relevant public associates the mark with the foreign claimant exclusively. This new approach also in turn protects the rights of the Indian proprietors who may have bona fidely adopted and used a mark.

[1] NR Dongre v Whirlpool Corporation [(1996) 5 SCC 714 ]

[2] NR Dongre v Whirlpool Corporation [(1996) 5 SCC 714 ]

[3] Haw Par Bros. International Ltd v. Tiger Balm Co. (P) Ltd. and Ors. 1996 (16) PTC 311(Mad).

[4] Milmet Oftho Industries and Ors. a. Allergan Inc. 2004 (12) SCC 624.

[5] Mac Personal Care Pvt. Ltd. and Ors. v. LaveranaGmbh & Co. Kg. 2016 (65) PTC 357 (Del).

[6] E.I. Du Pont De Nemours & Co V. Gemini Distilleries Ltd. 2004 (28) PTC 663 (IPAB).

[7] Toyota Jidosha Kabushiki v M/S Prius Auto Industries Ltd. 2016(67)PTC 374(Del).

The article was originally published on www.lexology.com on April 03, 2020 and can be accessed here.